Richemont sales go sky high thanks to online platforms
Richemont, one of the world’s largest luxury groups, and owner of brands like Cartier and Van Cleef & Arpels, reported earnings last week that demonstrated a massive rise in sales, thanks to the acquisition of digital retail platforms. The group acquired long-time interest Yoox Net-a-Porter and online second-hand luxury watch exchange Watchfinder, both of which added a chunk of business to Richemont’s top-line. However, the same deals had a negative impact on the bottom line, which slightly missed analysts’ expectations as a result.
Richemont’s share price has appreciated by 16% so far this year
Source: Yahoo Finance
Richemont said that sales overall rose by 27%, year on year, to 14 billion euro in the year ended March. A big part of that comes directly from YNAP, which now accounts for 16% of group sales, and is slated to become a more important part of the business as Richemont looks to push increasingly online. One of the first strategic moves Richemont is making with YNAP is a push into China, and last October, the group detailed plans to collaborate with Chinese ecommerce giant Alibaba to bring YNAP’s fashion offerings to the country. According to chairman Johann Rupert, those talks are progressing.
China is a big deal for Richemont, accounting for 38% of sales this year. That’s a big jump to 5.24 billion euros, from 4.32 billion the year earlier. Of course, luxury as a sector is being driven by China, so this is no surprise. In the 2018 Bain Luxury Study, researchers noted: “Chinese consumers led the positive growth trend around the world. Their share of global luxury spending continued to rise (now 33% of the total, up from 32% in 2017). Looking ahead, this positive growth trend is expected to continue in the range of 3%-5% per year through 2025 to reach €320bn-365bn [a year].”
Operating profit rose by 5% to 1.9 billion euros. This is a slight miss against consensus estimates, and is down to the cost of acquisitions made in the year.
Rupert said of the year: “Most of our markets were in positive territory, led by double-digit increases in the US and in all the main markets of Asia Pacific.”
Dominion holds Richemont in its Global Trends Luxury Fund.
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